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Life Insurance, Precautionary Saving and Contingent Bequest

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  • Fwu-Ranq Chang

Abstract

Purchasing life insurance is for the welfare of young children, par-ticularly preteens, who are liquidity constrained. In this paper, we present a life cycle model of life insurance that takes into account the ages of these young beneciaries. We show that, as the child ages, the need for protection is reduced and, consequently, the size of contingent bequest may shrink. The demand for life insurance is positively related to the number, age differentials, living standards, and the time needed to reach adulthood. Also, the breadwinner's life-time uncertainty and the unfairness of the insurance market encourage precautionary saving.

Suggested Citation

  • Fwu-Ranq Chang, 2001. "Life Insurance, Precautionary Saving and Contingent Bequest," CESifo Working Paper Series 444, CESifo.
    • Handle: RePEc:ces:ceswps:_444
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    3. Wang, Hongyang & Zhang, Dayong & Guariglia, Alessandra & Fan, Gang-Zhi, 2021. "‘Growing out of the growing pain’: Financial literacy and life insurance demand in China," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    4. Srbinoski Bojan & Strozzi Fernanda & Poposki Klime & Born Patricia H., 2020. "Trends in Life Insurance Demand and Lapse Literature," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 14(2), pages 1-46, July.
    5. Chen, C.-M., 2005. "Driven translocation dynamics of polynucleotides through a nanopore: off-lattice Monte-Carlo simulations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(1), pages 95-107.

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